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US-China Relations

HK01: MSCI Removes 66 Chinese Companies From Indices

HK01, a popular Hong Kong-based online media network, recently reported that finance company MSCI removed 66 Chinese stocks from its benchmark China Index and its All Country World Index during the latest MSCI quarterly review. The move by MSCI comes as Mainland China and Hong Kong stock markets plummeted, losing trillions of dollars in market value from their peak in 2021.

Most of the removed companies are in the real estate, pharmaceuticals, internet, and aviation sector. Specific names removed including famous companies such as Weibo, China Southern Airlines, Ping An Healthcare and Technology, as well as real estate developers Gemdale Group and Greentown China. The number of Chinese companies removed was the greatest seen in at least two years. The removals will be effective from the close of trading on February 29, 2024.

China’s weight in global investment portfolios has fallen significantly as China’s real estate industry sinks further into crisis, Chinese consumer spending continues to weaken, and alternative emerging markets such as India continue to perform well. Some experts expressed that MSCI’s stock removals highlight how money is moving out of Chinese equities as investors reduce their exposure. Such investor behavior is largely due to recent weakness in Chinese market fundamentals, ongoing financial instability, regulatory uncertainty, and concern over national-level risks.

Source: HK01, February 14, 2024
http://tinyurl.com/5t2te57y

NetEase: Mexico Surpassed China as Largest Supplier to U.S.

Data released by the U.S. Department of Commerce showed that in 2023 Mexico surpassed China for the first time in over 20 years to become the largest source of goods imported by the U.S.

Well-known Chinese news site NetEase (NASDAQ: NTES) ran a report about the Department of Commerce Data. Below are some excerpts from their article:

As part of the U.S.’ so-called “weaning off dependence on China” strategy, the U.S. Biden administration is urging companies to find suppliers in allied countries or move manufacturing operations back to the United States.

The value of U.S. imports from Mexico increased by nearly five percent from 2022 to 2023, reaching more than US$475 billion. At the same time, the value of U.S. imports from China fell by about 20 percent, to US$427 billion.

This is the first time in more than 20 years that Mexico has surpassed China and become the largest source of imported goods to the United States. The last time the value of U.S. imports from Mexico exceeded that from China was in 2002.

The biggest decline in U.S. imports from China was in commodities such as computers, electronic products, chemicals, and pharmaceuticals, which are all ‘politically sensitive’ for the United States.

The impact of COVID-19 on global supply chains has also forced American companies to look for nearshore suppliers. … However, the actual situation is more complicated than that. Some Chinese manufacturers have already established factories in Mexico too.

Source: NetEase, February 8, 2024
https://www.163.com/dy/article/IQDSPONL051481US.html

Chinese Scholar: Four Aspects of The US Global Strategy

On January 9, 2024, Xinhua News Agency hosted its 14th “Discussing World Affairs” international seminar with the theme “The Accelerating Evolution of Global Changes: Navigating China’s Diplomacy.” Wang Honggang, the Deputy Dean of the Institute of Modern International Relations of China, delivered a speech titled “Watch Out Four Aspects of the United States’ Global Strategy.” Xinhua released a 4-minutes-and-23-seconds-long video clip of his speech. Below are some translated excerpts from the speech.

“The first aspect is related to industrial policies. The Biden administration focused on the economy last year and will continue to do so this year. The U.S. economy is a hegemonic economy. Domestically, it needs to transform its industries, which means, externally, it will engage in more intense industrial competition with other countries. In the first three years, its actions were defensive, but in the fourth year, it may take more aggressive actions, such as challenging other countries’ external circulation (export) systems.

“The second change involves Russia and Ukraine, and Israel and Palestine. The U.S. politics is most afraid of being looked down by other countries. These two wars are likely to stimulate the U.S. to significantly expand its defense industry’s capacity and maybe even substantially update its military doctrine.

“The third feature is the coordination between geopolitical focal points and geopolitical hotspots. For the United States, both Eurasia and the Middle East are geopolitical hotspots, but not its geopolitical focal points. The Asia-Pacific, or the “Indo-Pacific,” is its true focus. Regarding the Northeast Asia (the Korean Peninsula) issue, the Taiwan issue, the South China Sea issue, and even the Sino-Indian relations, what strategy will the United States adopt? Will it pursue a strategy of letting it get into chaos first and then getting it under control?

“The fourth change is the cognitive warfare. With fewer resources, how can the U.S. achieve its goals? It certainly involves more covert and cost-effective operations: cognitive warfare. Through information manipulation, shaping external perceptions, disrupting opponents, and shaping favorable situations for oneself.”

Source: Xinhua, February 2, 2024
http://www.news.cn/world/20240202/6750fd70be4e462fa8821a32b318703c/c.html

Xinhua: US Defense Companies Profit from Israel-Hamas War

Chinese state news outlet Xinhua published an article about how U.S. defense companies have benefited from the Israel-Hamas War.

“As of January 30th, Israel’s military operations in the Gaza Strip have resulted in over 26,700 deaths and more than 65,000 injuries on the Palestinian side. Additionally, around 1.9 million people have been displaced, accounting for approximately 85 percent of the total population in Gaza.

“On the other side of the world, major U.S. defense contractors released outstanding financial reports for the fourth quarter and the full year of 2023. Raytheon Technologies reported sales of nearly $20 billion in the fourth quarter, with a 10 percent increase from the same period last year. Lockheed Martin also performed exceptionally well, with net sales in the fourth quarter of 2023 far exceeding market expectations, reaching $18.9 billion, an increase of $2 billion from the previous quarter. Moreover, Lockheed Martin, Raytheon, and General Dynamics all indicate record levels of unfilled orders, suggesting strong growth potential in the near future.

“According to data from the US State Department, the amount of military equipment sold by the United States overseas increased by 16 percent in the 2023 fiscal year, reaching a record $238 billion.

“Behind this stark contrast lies the blood-stained profit chain of the U.S. military-industrial complex: defense contractors funding congressional members to achieve personal political goals; lawmakers approving massive military spending to reciprocate and profit; high-ranking officials at the Department of Defense providing a steady stream of arms contracts, profiting through the revolving door between politics and business. Research data shows that over the past decade, 55% of US military spending has ultimately flowed to defense contractors. A US think tank revealed that in 2022, US taxpayers paid an average of $1,087 per person for Pentagon contractors, while the average per capita tax expenditure for U.S. basic education was only $270.”

Source: Xinhua, February 1, 2024
https://app.xinhuanet.com/news/article.html?articleId=cc059649d832d8b766aad7d1bb90d631

Chinese Tech Giants Ramp Up Lobbying in Face of US Government Scrutiny

Chinese tech companies like TikTok and SHEIN have rapidly increased their spending on lobbying efforts within the United States. TikTok’s parent company ByteDance spent $8.74 million on lobbying in 2023, a 77% increase over the previous year. SHEIN spent $2.12 million in 2023 on lobbying, a 760% increase. The moves come as the U.S. government ramps up scrutiny and rhetoric targeting the companies amid broader U.S.-China tensions. The statistics on lobbying expense come from mandatory disclosure reports that the companies filed with Congress. TikTok and SHEIN aim to expand in the massive U.S. consumer market as growth slows at home in China.

TikTok now has 170 million U.S. users, gaining popularity despite previous bans. An e-commerce feature was added to the platform in 2023. TikTok’s lobbying focuses on pushing back against bills in Congress that would restrict the company’s U.S. business or ban use on government devices. Starting after U.S. regulator discussion of a possible ban in 2020, TikTok has grown its lobbying staff to about 14 people. TikTok lobbying was likely successful in slowing momentum for a ban as public opposition fell.

SHEIN lobbies on apparel, e-commerce, and trade controls. The company reportedly hired a former U.S. Trade Representative employee to argue SHEIN’s economic benefits to Congress as the company plans a U.S. IPO. Some in Congress claim that SHEIN uses a customs loophole to sell goods that have been produced with forced labor.

Both companies aim to expand within the U.S. while facing more scrutiny over data and economic security.

Source: Nikkei, February 2, 2024
https://zh.cn.nikkei.com/china/ccompany/54759-2024-02-02-10-55-24.html

UDN: The United States Releases the List of Notorious Markets for 2023

United Daily News (UDN), one of the primary Taiwanese news groups, recently reported on the global “2023 Notorious Markets List” recently announced by The Office of the U.S. Trade Representative (USTR). The list including 39 online markets and 33 physical markets where piracy is rampant. Among them, China’s online markets Taobao, WeChat, Pinduoduo (U.S. branch name Temu), and seven physical markets (including Shopee) were named again.

These Notorious Markets are considered to be involved in or to be abetting a large volume of trademark counterfeiting or copyright piracy. This year’s list focuses on the potential health and safety risks posed by counterfeit goods, which use poor quality materials and are manufactured without supervision or safety controls, resulting in products that are substandard, ineffective or dangerous. U.S. Trade Representative Katherine Tai said that counterfeit and pirated goods harms workers, consumers and small businesses, and ultimately harm the U.S. economy. She added that crackdown on trade in these goods is important for economic growth.

This year, seven Chinese physical markets were named on the list, including Huaqiang Electronic World, Luohu Commercial City, Beijing Silk Street Market, and Wuai Market. Although Shopee, headquartered in Singapore, has invested heavily in the past year to enhance anti-counterfeiting capabilities, there still remain a large number of counterfeit goods on the platform, and problems such as slow response times remain.

Source: UDN, January 30, 2024
https://udn.com/news/story/6809/7743640

People‘s Daily: Sullivan Admits that US Efforts to Change the PRC Over the Past Several Decades Have Failed

People’s Daily posted a 17-seconds video clip (with Chinese subtitle) of Jake Sullivan, National Security Advisor of the United States, with title “Sullivan’s Admission: the U.S.’ Efforts to Change China over the Past Several Decades Have Failed.” In the video, Sullivan said:

“We realize that efforts, implied or explicit, to shape or change PRC (People’s Republic of China) over several decades did not succeed. We expect that PRC will be a major player on the world stage for the foreseeable future. That means that even as we compete, we have to find ways to live alongside one another.”

{Editor’s Note: The video clip seems to be from Sullivan’s long speech on the future of U.S.-China relations delivered at the Brookings Institution on January 30, 2024. A transcript of the entire speech is available here.}

Sources:
1. People’s Daily, February 2, 2024
http://world.people.com.cn/n1/2024/0202/c1002-40172130.html
2. White House, January 30, 2024
https://www.whitehouse.gov/briefing-room/speeches-remarks/2024/01/30/remarks-and-qa-by-national-security-advisor-jake-sullivan-on-the-future-of-u-s-china-relations/

Xinhua: Chinese Scholar on Three New Characteristics of the U.S.’ China Policy

Su Xiaohui, Deputy Director of the American Research Institute at the China Institute of International Studies, delivered a keynote speech via video at Xinhua News Agency’s 14th “Discussing World Affairs” International Symposium on January 9, 2024. Su believes that the U.S. continues to view China as its “primary competitor” and “the most significant geopolitical challenge [facing the U.S].” According to Su, the U.S.’ recent policy on China exhibits three new characteristics:

  • Firstly, U.S. policy on China “has been forced to return to some degree of rationality.” Su suggests that “in 2023, the U.S. gained a clearer understanding of China, realizing that it cannot easily suppress or defeat China and that it thus must accept ‘peaceful coexistence.'” Also, “the U.S. recognizes that the China-U.S. relationship not only affects the two nations in question but also influences the overall international situation. The international community hopes for overall stability in the relations between these two major powers, and that relations [between the powers] will not get out of control.”
  • Secondly, the U.S. “has recognized the necessity of cooperation with China.”
  • Thirdly, U.S. policy is now along the lines of “contain China while engaging with China.” Su said that U.S. pressure on China is now “done via provocations through various means and on various levels,” and that in competing with China “the U.S. aims to precision-strike China while reducing the blowback on itself.”

Su also mentioned that China should “be cautious of U.S. attempts to use intergovernmental communication mechanisms for its own benefits or for fostering strategic competition. The U.S. believes that, by communicating with China about arms control, it can pull China into certain arms control treaties and thereby impose restrictions on China. This would enable the U.S. to ‘win without fighting.’ But China should not allow the U.S. to weaken it via such a low-cost approach.”

Source: Xinhua, January 12, 2024
https://app.xinhuanet.com/news/article.html?articleId=75adb2d947c23b8e9a06a8309ef97a03